How to Save for a Down Payment for a House

Buying a house is probably the biggest purchase you will make in your life. Traditional mortgages typically require that the buyer make a down payment of 20% of the purchase price. Recently, however, lenders have been more flexible and you will sometimes hear of zero down plans. However, if you want to receive a good interest rate and avoid private mortgage insurance, it is a wise idea to have a significant down payment.

It is not easy for everyone to come up with the down payment. The good news is that you can turn to different sources for these funds. Some sources you can turn to for financing assistance include the Federal Housing Administration, Veteran's Administration, and state housing authorities. They may have programs that help first time and low to moderate-income families obtain a mortgage with a low down payment. If you want to purchase a home in a rural area, you can also turn to the US Department of Agriculture's Rural Housing Service.

Further, if you have retirement accounts available, other options may be available to you. Some 401(k) and 403(b) retirement plans may allow individuals to borrow money from the account to help purchase a home. Also, if you have an IRA account you may be available to withdraw funds for a first-time home purchase.

If you are saving money yourself, you need to make sure that you are taking the right steps. Money in a savings account that earns less that 1% interest will not help you much. If you plan to buy a home in less than five years, you could look into a high-yield savings or money market account for holding the down payment funds. You can also put the money into a certificate of deposit (CD).